Protocol for Coverage Assessment at Time of Litigation
1. Is the company a defendant/counterdefendant in litigation?
2. Are any claims for damages, including mere quests for attorneys’ fees or such other and further relief, sought against it?
3. What jurisdiction is the lawsuit filed in?
4. What is the principal place of business and state of incorporation of the insurers who issue policies that might respond to such risk?
5. Where is the principal place of business and place of incorporation of the corporate entity that issued the insurance policy that might respond to these claims?
6. What representations have insurers made regarding the scope of coverage, either in advertisements rendered in connection with solicitation of their products, or in express representation to the company, made to its brokers or directly to the company at the time of policy issuance?
7. What representations re the scope of coverage have been made in any materials provided to the broker and/or company?
8. What causes of action are asserted under what theories of recovery?
9. What past experience has the company had with this or other insurers under similar policy language involving similar claims for relief?
10. Under the law most favorable to the company of those potentially available to it, what reasonable meanings does its policy language have that may be compared to the fact allegations against the company?
11. What potential for amendment may exist in the underlying lawsuit consistent with the theories of recovery and the character of relief sought that might trigger coverage under the policy?
12. What is the likely exposure to the company in light of the damage claims available and anticipated costs of litigation to defend the lawsuit?
13. At what point does first-dollar coverage attach in light of the company’s SIR?
14. Does this equation change in light of the policies issued to company’s subsidiaries or acquired entities that may be implicated in light of who are joined as defendants in the suit or the character of the relief sought and the conduct at issue?
15. Assessing all these factors, what is the potential coverage available to respond to such claims, and what if any further action is appropriate in light of this analysis with respect to pursuit of coverage?
Creation of an Insurance Coverage Protocol
Whatever you can measure you can control. The Accounting Standards Board now includes the value of IP rights on a company’s balance sheet, recognizing the value of intangible assets to a company’s bottom line. Critically, what you can value you can also insure. The risk created by not having an intake system to assess the potential coverage posed by claims for damages in intellectual property and antitrust lawsuits is threefold:
(1) Attorneys’ fees and costs incurred prior to notice to your insurer are not covered in most jurisdictions;
(2) In some jurisdictions, such as New York and Illinois, a delay of less than one year in providing notice will deprive a company of realizing any benefits from its insurance coverage;
(3) Even where notice is provided, in some jurisdictions, unless pertinent facts from the underlying action which supplement the information available from the complaints are provided to the insurers, such facts may not be used to establish coverage as they were not “known” to the insurer.
Creation of an effective Protocol requires integrating coverage available, including hypotheticals which the insurers who issued policies concede will trigger coverage. Once created, customized software can be developed to systematically assess whether a new claim should be reported, and if so when, to whom, and including what facts to secure coverage.
